SLICE AND DICE

Urban Outfitters got pummeled by investors after it bought a pizza chain

Urban Outfitters is facing some serious challenges. Sales are slowing at its main group of namesake stores, and until today its stock was down 30% for the year after being up as much as 34%.

The company announced earnings for its latest quarter today (Nov. 16)—$52 million in profits on $825 million in revenue—that fell short of expectations. The sales figure was lower than last year, something affecting lots of retailers across the US.

So how is the company going to turn around sales? Apparently, part of the answer is pizza. The company earlier in the day announced that it was acquiring Vetri Family Group, a Philadelphia-based restaurant business whose crown jewel is the Pizzeria Vetri chain, for an undisclosed sum. The company operates nine locations in all.

Why would this help solve Urban Outfitters’ problems? Per a statement by Urban Outfitters CEO Richard Hayne accompanying the announcement: “Spending on casual dining is expanding rapidly, and thus, we believe there is tremendous opportunity to expand the Pizzeria Vetri concept.”

The company’s chief development officer, Dave Ziel, provided a bit more detail on the strategy, telling Philly.com: “We think retailing needs to become more experiential. I think there’s a craving for real socialization beyond social media.”

Investors emphatically disagreed, sending Urban Outfitters shares down about 7% during regular trading hours then another 12% after-hours following the earnings release.

That’s not to say combining a restaurant with a shopping experience is unheard of. Ralph Lauren opened its well-received Polo Bar earlier this year (paywall), and department stores like Macy’s have had them for decades. Plus, the company already operates a small number of restaurants, like the one it opened in its Herald Square location over the summer before it mentioned the Vetri acquisition.

On a call with analysts after it reported results, all the questions were about firming up business and none concerned pizza, presumably because the company has bigger worries.

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